Tuesday, 25 February 2014

Hyperinflation in Berlin

25th February 1923

This day in history...The price of bread in Berlin rises to 2,000 Marks 

Following the First World War, the Treaty of Versailles named Germany as the 'war guilt' and had damaging effects on the country. The Treaty's terms were: 
  • An army of only 100,000 soldiers, six battleships, and no airforce
  • 132 billion gold marks to be paid in reparations (approx £55 billion)
  • The return of Posen, the Polish corridor, Alsace-Lorraine, and all over-seas colonies
  • The return of Poland, Latvia, Estonia, Lithuania
By 1921 Wiemar Germany had just managed to repay the first installment of 2 billion marks, most being paid in coal, iron and wood. With money scarce and Germany's richest economic area under attack from the French, Germany decided to print more money to cover costs of the reparations and to provide for its country. This was obviously a bad idea. This made Germany look weak and any money that was being invested in the country was quickly removed by foreign investors. This led to inflation, and as the prices rose quicker than people could spend their money, hyperinflation became inevitable.

Image retrieved from Google. Will be removed at owner's request.
Wheelbarrow of money to buy necessities at the grocers

The impacts of Hyperinflation were shocking. The price of bread was 2,000 marks (approx. £844) in February, but this rose to a staggering 200,000,000,000 marks (approx. £84 billion) by November. To put it into perspective; people were paid by the hour and had to rush to pass their wages onto their families so that it could be spent before its value was worthless. Even restaurants didn't print menus because by the time the food arrived, the price had gone up. 


Image retrieved from Google. Will be removed at owner's request.
Image retrieved from Google. Will be removed at owner's request.




















The image above (left) shows children playing with money like building blocks: It was cheaper for children to play with the money than to buy toys. The other photograph shows a woman burning hyper-inflated marks: It was cheaper to burn the money that to use it to buy firewood. Lets hope history doesn't repeat itself!








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